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What is the minimum price for the convertible bond

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Reference no: EM132976835

Question - DEF has recently issued convertible bonds. These bonds have a conversion price of $25 and are available for immediate conversion. The current stock price of DEF is $21, and the current market price of the convertible bond is $990.

-What is the minimum price for the convertible bond? 

-Explain the difference between the current market price of each convertible bond and the value of the common stock into which the bond can be immediately converted? 

-Mayers (2000) suggests that convertible bonds can be the most cost-effective solution to a sequential financing problem. Explain this phenomenon.

Reference no: EM132976835

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